Red Flags in Digital Transformation

Date

February 21, 2024

Read time

| 7 Minute Read

Why is it a Strategy, Not a Project?

Projects are defined by PMI as “a temporary endeavor undertaken to create a unique product, service, or result.” In the mind of a manager, building standardized widgets on an assembly line is not a project because it violates the second part of the definition. These products are not unique, and the ways work is organized, and performance is measured on an assembly line ~~differ~~differs from how this is done for projects. DT violates the first part of the definition — organizations who are not continually maturing digitally are continually fading into non-existence.

Organizations doing DT correctly embrace it as a strategy. They organize the work and measure progress in different ways than if it were a project. They recognize that they are 1) driving towards a moving goalpost and 2) out-running a five-star linebacker dead-set on putting them in the ground.

Benefits of a Digital Transformation Strategy

Survival is a strong motivator for organizations to have a DT strategy. The business graveyard is full of manufacturers that resisted the steam engine, assembly line, and automation technologies. Maybe it has something to do with our species being accustomed to accepting a mortal fate because, biologically, we’re comfortable with perishing slowly and painfully.

Wow, that sounded more gruesome than I intended. My Broncos fandom must be bleeding into my work again.

Let’s consider benefits that are more rewarding than not dying. Being competitive is a pretty good motivator. Digitally mature companies outshine their peers because they have better interactions with their trading partners. Orders are placed and fulfilled accurately, goods are produced at a high-quality level, and the people’s energy is channeled to providing high levels of service. Manufacturers lacking a Digital Transformation strategy struggle with almost every discrete digital transformation initiative. They are repeatedly evaluating the compatibility of an increasingly complex amalgamation of disparate technologies, their business may be solving the same problem multiple ways depending on which plant manager is involved, and they create exposure to shadow IT due to their lack of agility. These issues are all detrimental to the business’s competitiveness.

So, what is the natural outcome for businesses that make sound, strategic decisions and outcompete others in their industry? Simply, they generate profits and thrive. Being digitally fit and using strategies that position manufacturers as process and technology leaders makes them more sustainable.

Identifying & Overcoming Red Flags

1. There is no cry for change

Let’s start with the biggest red flag —no cry for change. Whimpers and murmurs don’t count, and it’s important to be able to tell the difference. Cries are heard far and wide, top to bottom, and they are in response to a clearly perceived threat. A solemn truth: the DT team does not have the job of creating urgency for a company that doesn’t already see the need to digitally transform staring them in the face.

There are two possible reasons organizations don’t see the need: 1) they believe they are already digitally mature, or 2) for whatever reason, they will never make the cry before meeting their ultimate fate. Perhaps we should examine some of the reasons why digitally immature organizations aren’t making the cry, with the understanding that it is not the job of the DT leader to do it for them.

There may be resistance to change at key levels of the organization. We like to use the acronym C.A.V.E.-men (Citizens Against Virtually Everything), to describe this situation. When this is the case, it’s pointless to address this from the perspective of the DT leader because there are circumstances far beyond their control at play. The future of the company may already be set in stone — there might be a pending acquisition, bankruptcy, or other existential issue facing leaders or the organization itself.

Maybe the company already has the wrong people in place. Are there executives disregarding existing strategies and valuing their fiefdoms over cross-functional collaboration? Doing so, are they fostering toxic cultures, or demonstrating an inability to lead changes in business processes to take advantage of new technologies? If the company looks in the mirror fatalistically and sees this image of itself, it needs a therapist instead of a DT leader.

2. There is no digital strategy

A recognizable trait of a digitally mature company is the following: if you ask anyone at the company what their digital strategy is, they can recite the answer to you immediately. If this isn’t true of the organization where you work currently, that’s not good. That said, I also believe it is not fatal. This is where a DT leader can step in and make a difference.

Digital strategies sound something like this (credit to 4.0 Solutions): "We use accurate, unified, digital data and information to drive decision making, quickly, and in real-time. We leverage an infrastructure that treats all producers and consumers of data and information as nodes in an ecosystem that interact with one another through a Unified Namespace (UNS).”

Let’s pick this example apart to reveal why it’s a good digital strategy. The first sentence sets this strategy apart from how businesses treated data in the past. Accuracy was a function of how well humans provided the data (imperfectly). Unified sources of data were expensive to build and difficult to maintain. Finally, not all data was digital, nor was it always being transformed into useful information. Decisions were made slowly based on outdated information or by making guesses driven by ego and intuition. How do you think workers on the front lines feel about management under conditions like these?

The next sentence in this strategy describes an idealized infrastructure and also sets forth a target that can be measured against. We know that a finite number of information producers and consumers exist, and we know that they are good-to-go when they’re plugged into the hub of their ecosystem, the UNS. With this simple goal in mind, we have the beginnings of a roadmap and timeline — key artifacts that can be used to communicate progress to stakeholders.

3. There is an inadequate allocation of resources

A successful digital transformation strategy requires a robust allocation of resources. Without adequate support, even the best strategies can falter. Three types of resources constrain DT initiatives — financial, human, and senior management support.

We always want to invest our financial resources, but realistically, it is easy to squander them during these initiatives for a multitude of reasons. Vendors will line up at your door to sell their solutions, many of whom will have their own red flags. Any proposed solution should be carefully evaluated based on cost vs. value provided, especially when it comes to capitally intense investments in reliable infrastructure, sensors, industrial controllers, and software licenses.

Human resources are another sink-or-swim issue for DT initiatives. Many organizations fail at the first step of building their DT team — identifying the roles that need to be filled. That list may resemble something like this:

Product Owner

A role with the authority and responsibility to say whether or not the team is building what the business needs.

Architect

A technical role that makes decisions about the technologies that will be used to run digital systems.

Developers

Automation

The technicians or mechanics who program and configure endpoints on the plant floor.

Communications

The network engineers who facilitate communication from central systems out to the edge and back.

Platform

The team responsible for organizing and sometimes presenting the data that flows into DT systems.

Data Analysts

Specialists mainly concerned with manipulating and presenting information that drives business decisions.

IT Liaison

Someone who goes between the DT team and the IT department to provision network resources that support the DT initiative. Also works to prepare the Helpdesk to eventually play a supporting role in the solution — documenting network security decisions, writing processes to onboard new users, updating the Service Catalog, etc.

Leadership Liaison

Someone who goes between the DT team and Leadership to provide information and requests.

The basis of the list included in this article was adapted from the 4.0 Solutions Mastermind Program. These roles may or may not all be different individuals, and the size of the team should scale according to the complexity of the business.

Digitally immature organizations face the issue of having a limited understanding of digital technologies and may have a hard time attracting talented individuals looking for environments where their skills can be applied from day-one. Filling the roles becomes an issue, but numerous others can impact each individuals’ performance. Investments will need to be made in training and professional development if an organization wishes to commit to supporting its own digital systems and retain talent. There will also be a blend of systems integrators and consultants involved in initially getting things going — and this arrangement needs to be managed carefully to avoid conflict and hostility (”these must be the guys who are going to steal my job” sentiments may creep in).

Senior management support is crucial, yet tends to be a limited resource in digital transformation initiatives. This support can be easily lost if they believe the transformation is not aligned with the overall business strategy or if the time-to-value is too long. Additionally, a lack of clear (i.e., not overly technical) communication and infrequent updates can make senior management lose confidence in the initiative. Gaining and maintaining this support requires consistently demonstrating the value of digital transformation through measurable outcomes, aligning the transformation goals with the organization's strategic objectives, and maintaining open lines of communication through the leadership liaison role to keep senior leaders informed and engaged.

Think about how prepared you are (or aren’t) to tackle these issues of limited resources, and be open to accepting help.

4. There is not a path to move away from closed systems

Closed systems are pervasive and have resulted in an asymmetric upside for the technology industry at the expense of the manufacturing sector. Manufacturers are forced to make technology investments as the stakes are raised to participate more actively in digital supply chains. Realizing this, technology providers are keen to lock manufacturers into closed ecosystems and siphon as much value from them as possible. It can cost a king’s ransom to buy an add-on license for API access to a vendor’s closed solution, and that may still be a relatively small figure compared to the cost of skillfully implementing a point-to-point integration between two different systems.

Often, until the integration is complete, there is limited value in having two siloed systems in a digital ecosystem.

Slowly, manufacturers are waking up to this reality and are beginning to show support for technologies that value openness. When this happens, it becomes obvious that 1) you didn’t need to be a digitally mature organization when your main digital competence was writing checks to technology companies and 2) becoming a company that leverages open technologies in its digital ecosystem is tough, but the rewards are liberating. Not only will you be able to increase your own efficiencies, you’ll be ready to participate in the digital supply chains of the future.

5. There are vendors making bold, unbacked claims

Vendors may make grandiose claims about the capabilities of their solutions without providing concrete evidence or the opportunity to demonstrate the solution in the customer’s actual environment. To deal with this, it is important to always request demos and proof of concept (PoC) trials to see the solution in action. Case studies and marketing materials were sufficient for closed solutions in the past, and now it is becoming the manufacturer’s responsibility to push back against this practice that undermines their ability to realize the benefits of digital technologies.

In fairness to the vendors, it is also important that manufacturers have explicit minimum technical requirements and a clear understanding of how the digital technology will address a problem they have. Good vendors will call attention to these misalignments, while bad vendors will continue making grandiose claims.

Finally, vendors must recognize the importance of providing secure and practical solutions in terms of supporting and maintaining their solutions over the long term. I recommend evaluating the vendor’s support and maintenance plans, including their responsiveness and ability to provide long-term updates and patches. These factors directly impact the total cost of ownership for a solution, and they should be as carefully considered as the vendors’ bold claims.

What you can do

If you’re ready to start your digital transformation journey, it begins by finding the right support to set your organization up for success. Consultants with experience implementing DT strategies can spot these red flags from a mile away, and they know how to help their clients overcome them.

The future is digital — are you ready to transform? Get in touch to discuss ways we can work together to elevate your business!

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